SA Affordable Housing January - February 2019 // Issue: 74 | Page 18

FEATURES
Finance must focus on resale
Over the past 24 years the government has built about three million
homes – and while this is nowhere near to solving our affordable housing
backlog – it has stimulated a potentially powerful economic engine.
By Warren Robertson
16
JANUARY - FEBRUARY 2019
T
he affordable housing sector backlog can be
addressed as long as it is approached carefully and in
the correct way, especially by government and
financial institutions, says Kecia Rust, executive director
and founder of the Centre for Affordable Housing Finance
in Africa (CAHF).
Statistics provided by CAHF state that 1 888 979
properties built by government were registered with the
deeds office as at the end of December 2017. Of these,
951 850 are situated in the major metros and 847 292 of
those are older than eight years, making them eligible for
trade on the resale market.
These houses form a significant 30% of all deeds
registered residential properties in South Africa and may
form the foundation of powerful economic change in the
country, provided they can be leveraged to generate
economic opportunity for legitimate owners who buy and
sell them in the formal system.
There are multiple reasons for this.
“Everyone understands that a home can be an excellent
private asset. It can be used as security against a loan, it
can provide an income and it forms the basis of effective
citizenship by providing an address. That’s the triangle
everyone knows,” explains Rust, who says the real
economic benefit of home ownership can be seen on the
impact it has on the local economy.
“Formal home ownership creates jobs in construction
when the houses are built and in retail when they are sold –
people need new furniture, curtains and so on. A collection
of homes also need services, maintenance, transport hubs,
schools and the businesses that arise to provide these
services also stimulate the economy,” she says, adding,
“With the direct impact multiplier, for every R1 invested in
housing construction and residential rental, the economy
generates R1.92.”
In addition, the financial sector benefits as new
mortgages and loans are taken out and transfers of
ownership are confirmed.
This seems simple enough, but currently it is not
happening because the cost of selling a home formally is
seen to be prohibitive with no real obvious benefits.
Secondly red tape and backlogs at the municipality and in
the conveyancing process can make the transfer drag on for
months, when owners need a quick turnaround. Rather than
take on the costs of transfers, rates certificates and
conveyancing fees or tackle the deeds office then wait
months for confirmations, some homeowners at South
Africa’s lower end opt to simply sell their houses without
any formal record, and for what they can get in cash.
“The trick is to get those homeowners to see the
benefits of selling their homes formally, and to do so we
need to make it as easy, quick and as cheap as possible,”
A typical informal settlement in South Africa.
says Rust who believes that the rewards for achieving this
are immense for both the country’s poor and the South
African economy.
“The average churn rate for the entire residential
property market in South Africa is 2.58% a year. Applying
this to eligible government-subsidised stock in the major
metros suggests the potential for 21 860 new resale
transactions a year, which could translate into many new
mortgage loans, further growing the economy,” she says.
“The sellers of these houses will then become new buyers
with equity, capable of buying at the next level.”
It’s a system – that if enacted – could see people gain
access to the residential ownership ladder who previously
may have been trapped in informal housing.
“It is important to encourage government and financial
institutions to grant loans and subsidies to people who are
eager to enter the resale market. Waiting for a brand new
RDP house can take decades, whereas making finance
available and allowing people to enter the formal housing
market could see them already empowered in that time,”
adds Rust.
With this in mind CAHF has opened an experimental
Transaction Support Centre in the Desmond Tutu Sport &
Recreation centre in Khayelitsha, Western Cape, with its
partners, 71point4. The goal is to connect buyers and
sellers to lawyers, estate agents and others in the formal
market so they can be educated regarding the benefits of
selling their homes formally, while potential problems with
title deeds can be overcome and the process of selling into
the formal sector can be made as smooth as possible.
“The TSC doesn’t earn commissions on sales or charge
any fees for our advice or assistance,” says Rust who adds
that, if it’s successful, the TSC model will be rolled out to
other areas.
www.saaffordablehousing.co.za